Shenhua slashes investment budget as net drops
China Shenhua Energy, the listed unit of the mainland's largest coal producer, Shenhua Group, has cut its capital investment budget by 19 per cent after posting a 21.6 per cent year-on-year drop in third-quarter net profit.
The firm cited "changes in the external investment and operating environment" and project approval progress for the revision of its overall budget for capacity expansion to 54.5 billion yuan (HK$69 billion) from 67.5 billion yuan announced in March.
All the cuts are related to its coal-mining and logistics operations, including a 38.4 per cent reduction to 10.9 billion yuan in spending on new mining capacity and a 20.4 per cent decline to 27.9 billion yuan in spending on logistics - covering expenditure on railways, ports and shipping.
But expenditure on power generation has been revised up by 10 per cent to 14 billion yuan, China Shenhua said. This comes as the firm unveiled lower profit from coal mining and better profit from power production.
Net profit dropped to 9.43 billion yuan for the quarter to September from a year earlier, based on international accounting standards. For the first nine months, net profit declined 11.5 per cent to 34.3 billion yuan.
The nine-month decline was driven mainly by an 8.6 per cent fall in the average selling price of self-mined coal. Sales were up 2.9 per cent.
Coal production costs rose 2 per cent year on year due to higher salaries, maintenance and safety expenses and land acquisition and mining costs.
The fall in profit from the mining operations was partially offset by better profit from the power business, which benefited from a 0.8 per cent nine-month rise in average power selling price and an 8.1 per cent decrease in coal cost per unit of output.
Meanwhile, rival China Coal Energy posted a year-on-year fall of 79 per cent in third-quarter net profit to 440.5 million yuan, based on mainland accounting standards, while profit for the nine-month period dropped 54 per cent to 3.18 billion yuan.
Yanzhou Coal Mining reported a third-quarter net profit of 1.8 billion yuan, compared with a 131.8 million yuan loss a year earlier. For the first nine months, it had a net loss of 588.6 million yuan, against a profit of 4.74 billion yuan previously.